A new system of merit raises will be introduced Monday along with the 2013 budget, Ballard spokesman Marc Lotter said Thursday during an interview in Ballard’s office.

Ballard this spring raised the pay for 14 of his staff members an average of nearly 18 percent. He’s defended the controversial raises—which were only made public recently—as necessary to retain top talent.

Ballard reiterated during the interview Thursday that spending in his office remains under budget. The raises, as well as the additional position of deputy mayor for education, were funded through employee attrition and by spending less on non-personnel budget categories, he said.

Ballard said his proposal will give other city agencies the opportunity to do the same. “They have to make a choice,” he said.

If it sounds like a move to prompt budget cuts, he said, “It is.”

City Controller Jeff Spalding forecasts a 2013 budget deficit of $50 million to $60 million. That could shrink, depending on how much the city spends from its $30 million rainy-day fund. The money is being held over since the state Department of Revenue corrected accounting errors that short-changed local governments.

Ballard said criminal justice agencies, which account for 85 percent of spending from the city’s $569 million general fund, are due for cuts. That would include offices such as the Marion County sheriff and prosecutor, which are led by elected officials who can’t be fired for spending too much.

What’s more, they may have political cover from the Democrat-controlled City-County Council. Sheriff John Layton, a Democrat elected in 2010, already submitted a budget request that exceeded his 2012 budget allocation.

Ballard, a Republican, would not reveal what his introduced budget will look like, but Prosecutor Terry Curry said his staff has been told to include a 5-percent cut. Agencies were also asked to submit a proposal that reflected their needs, he said.

“We were, as of a week ago, uncertain as to what was going to be submitted on our behalf,” Curry said Thursday. “We’re still uncertain as of today.”

Curry said the mayor’s office hasn’t briefed him on the merit-raise proposal, and he wondered whether that would come at the expense of other budget areas.

“I hope for the sake of our staff of attorneys there is sufficient revenue so we can give raises and fund everything else it costs to run an office of this size.” He said there have been no pay increases in his office since 2009. The prosecutor has more than 350 employees, including 175 deputy prosecutors.

Curry said he has already “slashed to the bone” all non-personnel spending.

Ballard’s merit-raise proposal will include a system for rewarding top performers, Lotter said. It would apply to roughly 4,000 employees who aren’t covered by a union contract, he said.

Lotter said the merit-pay system has been in the works for a “long” time. Ballard insists that the raises handed out on his staff were no secret to the council. He called Democrats’ demand to rescind them a “smokescreen.”

“We told the council leadership,” Ballard said. “If they didn’t tell everybody in their caucus, that’s on them.”

McLaughlin covered business for daily newspapers in Massachusetts and Florida before joining IBJ in 2008. A native of the St. Louis area, she appreciates Indiana’s Midwestern hospitality. Given her beats, you may find her taking in art, chronicling the death of a factory town or touring suburban developments. McLaughlin graduated from the University of Missouri School of Journalism in 1998.